Minimum capital, logistics consolidation will check ports downtime

As companies and firms count their losses, and complain about increasing operating cost due to the traffic gridlock and congestion at the Apapa ports, industry operators insist that these could have been greatly minimised if the Federal Government prescribed minimum working capital for the domestic logistics sector.

Prescription of minimum capital, as was done in other sectors like the financial services, would force the consolidation of the logistics sub-sector and encourage mergers in the maritime industry.

Speaking exclusively with The Guardian in Lagos, the Managing Director, Ports & Terminal Multiservices Ltd., a member of the Grimaldi Group, Ascanio Russo, said this is the only way to restore sanity and cut down the mayhem being experienced around the ports areas.

Admitting that the ports reforms, particularly, the concessioning of the ports in 2006, had brought in millions of dollars investment, he however insisted that there has been no corresponding investment in the domestic logistics and services arm.

He argued that consolidation would not only enhance services and downtime at the ports, but also reduce congestion, eliminate the proliferation of service providers, and help check the importation of arms and ammunition, and other dangerous or banned goods.

Ascanio said:

At the local level, the only area where I can see room for consolidation, and I think this is an area where the government should really try to assist to consolidate is the area of freights, logistics company or the courier services; you know the industry is super fragmented.

There are thousands of clearing agents and this doesn’t help, because most of these companies are not structured; they are not big companies that you can even hold responsible. For example, when there is importation of arms and ammunition like you said before, sometimes it is difficult to understand who was the clearing agent involved, who was the importer involved, and even in this chaos that we are experiencing outside the port where there are thousands of trucks belonging to thousands of different companies. “We don’t really have big logistics operators, I mean big clearing agents with a number of good and healthy trucks. Rather, we have a super fragmented industry with thousands of small players, thousand of clearing agents, thousand of truck owners, and these are all companies which are striving on very low margins.

Most of these companies don’t even have anything at stake. Even if they are doing something illegal, and they withdraw their licence, they would come back with a different licence, and this is part of the reform we have been advocating for years.

Elaborating, the Nigerian-Passport holder, noted that many of the trucks in use around the Nigerian ports are between 40 and 50 years old, adding that given the dilapidation of the roads, there is now way to avoid congestion or traffic gridlock as currently being experienced around the ports areas since the vehicles park up at the slightest pressure.

As a result, Ascanio said only the prescription of a minimum working capital for this set of operators, would be the game changer. “If we say, you need to have a minimum capital to be a clearing agent then of course all these small agencies will have to come together and structure like a proper company like other operators in the industry – the shipping agencies, the terminal operators.

“Some these agencies are super professionals, but some are just briefcase carriers, moving around and that is the problem. The same thing goes for in the haulage sector; the trucks, and this one is a bit more complicated because it’s capital intensive. But that is an area that the Federal Government should come in and even support the creation of dedicated funds for the acquisition of better trucks.”

As part of the ports reforms, the Nigerian Ports Authority (NPA), instituted a call-up system for trucks and articulated vehicles to decongest the ports and surrounding areas, but this has not helped much because of the fragmentation of the transportation system.

Agreeing, the Nigerian Maritime Administration and Safety Agency (NIMASA), which regulates offshore vessels operation, said consolidation and minimum working capital would bring a lot of sanity to the local logistics industry. Assistant Director, Public Affairs for NIMASA, Isichei Osambgi, told The Guardian on the telephone that government and its regulatory agencies should work towards consolidation.

He said: In our own case, our sub-sector is self regulatory because it is highly capital intensive, and operators know that just like the aircraft owners, if your equipment are down, you lose money. With minimum capital logistics and haulage operators will be able to retool and buy new vehicles for their operations.”